U. S. SECURITIES AND EXCHANGE COMMISSION 
                               Washington, D.C. 20549

                                    FORM 10-KSB

                    Annual Report Under Section 13 or 15(d) of 
                        The Securities Exchange Act of 1934


             December 31, 1996                                      0-11353
             (For the year ended)                    (Commission File No.)

                           CIRCUIT  RESEARCH  LABS,  INC.
        Arizona                                           86-0344671
        State or other jurisdiction of    (IRS Employer Identification No.)
        incorporation or organization


                      Address of principal executive offices:
                    2522 West Geneva Drive Tempe, Arizona 85282
                                                                           
                     Registrant's Telephone No.  (602) 438-0888            
                   
                                                                               
             Securities registered pursuant to Section 12(b) of the Act:
                                     None


             Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, $.10 Par Value


        This registrant has filed all reports required to be filed by
        Section 15(d) of the Securities Exchange Act of 1934 during the
        preceding 12 months and has been subject to such filing
        requirements for the past 90 days.

        Disclosure of delinquent filers in response to Item 405 of
        Regulation SB is not contained in this form, and no disclosure will
        be contained, to the best of Registrant's knowledge in definitive
        proxy or information statements, incorporated by reference in Part
        III of this Form 10-KSB or any amendment to this Form 10-KSB.


        The registrant's revenues for fiscal 1996 were $ 2,541,730.

        The aggregate market value of the voting stock of the registrant
        held by non-affiliates of the registrant on February 28, 1997,
        based on the closing sales price for such stock in the 
        Over-the-Counter market as reported by NASDAQ on such date was
        $611,855. 


        At February 28, 1997, 597,682 shares of the registrant's common
        stock were issued and outstanding.

          Page 1



        The registrant's December 31, 1996 Annual Report to Stockholders is
        incorporated by reference in Parts I, II and III.

                      Exhibit Index located on page Seventeen.



                            CIRCUIT RESEARCH LABS, INC.

                       INDEX TO ANNUAL REPORT ON FORM 10-KSB

        PART I                                                 Page

        Item 1         Description of Business                   3
        Item 2         Description of Property                   9
        Item 3         Legal Proceedings                        10
        Item 4         Submission of Matters to a Vote of 
                       Security Holders                         10


        PART II

        Item 5         Market for Common Equity and Related 
                       Stockholder Matters                      11
        Item 6         Management's Discussion and Analysis 
                       or Plan of Operations                    11
        Item 7         Financial Statements                     11
        Item 8         Changes in and Disagreements with 
                       Accountants on Accounting
                       and Financial Disclosure                 11

        PART III

        Item 9         Directors, Executive Officers, 
                       Promoters and Control Persons:
                       Compliance with Section 16(a) of 
                       the Exchange Act                         12
        Item 10        Executive Compensation                   14
        Item 11        Security Ownership of Certain 
                       Beneficial Owners and Management         16
        Item 12        Certain Relationships and Related 
                       Transactions                             17
        Item 13        Exhibits and Reports on Form 8-K         17




          Page 2



                                      PART  I

        ITEM 1 - DESCRIPTION OF BUSINESS

        General

        This information is incorporated by reference to "Corporate
        Profile" and "Selected Financial Information" on page 1 of the
        Company's 1996 Annual Report to Stockholders (the "1996 Report");
        "Corporate Overview" on page 3 of the 1996 Report; and Notes 1, 2
        and 8 to the Company's Consolidated Financial Statements on pages
        17-22 of the 1996 Report.  In addition, reference is made to
        "Patents and Trademarks" on page 7, "Competition" on page 7, and
        "Dependence on Major Customers" on page 8 of this Form 10-KSB.

        Audio Processing

        Audio processing equipment produced by the Company is used by radio
        and television stations, entertainers and recording studios.  The
        Company's equipment "repackages" audio signals produced by
        microphones, recordings and other audio sources.  The equipment
        alters such signals to control audio loudness (amplitude) and tonal
        balance (equalization) prior to transmission.  Audio processing
        shapes the audio sound wave when it is in electrical impulse form
        before it is transmitted by a carrier wave.
        Radio stations utilize audio processing equipment to control the
        electrical amplitude limit of audio signals (modulation limit) as
        required by government regulations and to control the quality of
        radio station signals received by listeners.  All radio stations
        utilize some type of audio processing to comply with governmental
        and environmental regulations and to improve the apparent quality
        of their signals.  Approximately 10,800 AM and FM stations in the
        United States use audio processing, as well as more than 19,000
        radio stations in other countries.  Of the approximately 1,600
        television stations in the United States, about two-thirds of them
        now broadcast in stereo, which requires audio processing.  Based on
        replacement equipment orders, the Company estimates that the
        average useful life of audio processing equipment is less than five
        years.  Other recently developed products are appropriate for the
        audio processing needs of the recording and performing industry.

        The Principal Products

        AUDIO PROCESSING PRODUCTS

        CRL's audio processing equipment for radio broadcast can be
        separated into four different series or product families, Digital
        Series, Modular Series, Amigo Series and the Signature Series.

          Page 3


        Digital Series

        The newest addition to CRL's radio processors is the Digital
        Series. CRL digital products are on the leading edge of technology
        with 100% digital architecture. The principal products are: 

             DP-100 Digital Processor  The CRL DP-100 digital
             processor is the newest addition to our FM processing
             line. It is currently the only digital audio processor to
             use 32 bit floating-point technology. Its advance design
             allows the unit to serve a long life in it customer's
             hands. The modular construction makes it possible for CRL
             to offer specific PCB upgrades without changing the main
             chassis. This design approach allows CRL to sell
             additional upgrade products to current users of the
             DP-100. The DP-100 FM digital processor gives a strong,
             high quality sound that attracts and holds the listening
             audience. The radio audience will enjoy a clear, bright
             and appealing sound that is easy to listen to for long
             periods of time. The DP-100 uses the latest digital
             technology to its fullest potential to produce the most
             advanced digital processor on the market. The DP-100
             includes a true digital stereo multiplex generator, gated
             AGC (Audio Gain Controller), 5 band compressor,
             multi-band limiter and graphic equalizer. Also included
             is CRL's exclusive stereo sound enhancement and unique
             dynamic gating system.

             SC-100 RDS/RBDS (Radio Data Systems/Radio Broadcast Data
             Systems) allows a FM radio station to transmit additional
             streams of digital information giving the station new
             promotional methods, new public service opportunities and
             exciting new revenue possibilities. CRL's SC-100 is a
             RDS/RBDS generator using the latest in DSP (Digital
             Signal Processing) digital technology. The visual text
             message that the SC-100 sends to the new "smart radios"
             can be used for call letter and slogan recognition,
             traffic and weather reports, emergency alert messages and
             display advertising. The SC-100 can also be used for
             paging, billboard sign control, global positioning  plus
             other exciting applications. In addition, CRL has become
             a value added reseller of equipment  to build RDS/RBDS
             paging systems. CRL configures the system to the
             customer's requirements and, for an additional fee can
             oversees the installation of the system.

         Modular Series
        In its Modular Series CRL designed the entire AM or FM processing
        chain as building blocks. As a result, the station can start
        simply, with just a limiter and stereo generator, for instance, and

          Page 4



        then add a compressor later as its processing needs change and its
        budget allows. The modular approach allows the radio station to buy
        just what it needs. The principal Modular systems are:

             FM1g  A basic FM audio processing system consisting of
             CRL's automatic gain controller (AGC) /limiter and
             digitally synthesized stereo generator.

             FM2g  A complete system with an AGC, a limiting system
             and digitally synthesized stereo generator.
             FM2g+ A comprehensive FM system with an AGC, a limiter, a
             digitally synthesized stereo generator and four band
             compressor.
             AM2m An AGC and a peak limiter are the two components of
             this basic mono AM system.
             AM4m CRL's most popular AM system is a three unit system
             consisting of an AGC, a modulation limiter and four band
             compressor.
             AM2s CRL's basic stereo AM system includes a stereo AGC
             and a limiter.
             AM4s Three components form CRL's enhanced stereo AM
             system. The system includes a stereo AGC, four band
             compressor/equalizer and matrix limiter.


         Amigo Series
        The next family of radio processing is the Amigo Series. The Amigo
        family of processors is an integrated "one box" processing system
        designed for the small to mid-size station in both international
        and domestic markets. The Amigo family of processors is one of the
        best performing processors in its class. The principal Amigo
        systems are:

             Amigo The Amigo is a combination of a dual band AGC, a
             variable pre-emphasis multi-band limiter and digitally
             synthesized stereo generator. The single unit contains a
             complete FM audio processing system. The Amigo is
             flexible and powerful, yet designed for easy set up and
             use. The Amigo FM is one of CRL's most popular selling
             systems.

             Amigo AM The Amigo AM is a complete stereo audio
             processing system. It includes CRL's patented AM stereo
             processing circuitry as found in the modular AM systems.
             The system includes a dual band AGC, triband limiter, and
             NRSC (National Radio Systems Committee) output filtering.

             The Amigo AM can be used on mono for customers waiting to
             convert to stereo.

             BAP-2000 A complete stand alone audio processor for any
             mono FM. The system consists of an advanced dual band
             audio AGC and limiter. Internal options selected by the

          Page 5


             radio station allow the BAP-2000 to be tailored to handle
             most any mono audio control job.

         Signature Series
        The Signature Series is a high performance audio processing system.
        The principal products are:


             Audio Signature The Audio Signature gives the  power of
             digital control with multi-band compression and limiting
             for high performance power. The FM Audio Signature
             includes a stereo AGC and four band compressor with a
             sophisticated set of processing controls to produce the
             radio station's own unique and distinctive sound.

             Modulation Signature The Modulation Signature features a
             digitally modulated stereo generator and a fully
             adjustable limiting system.
             Real Time Event Sequencer The Real Time Event Sequencer
             is a programmable event timer that can control any
             combination of eight outputs and store up to 255 events.
             Events can be programmed to the second for each day of
             the week, for each different month of the year. 

         Television Products
        CRL has a complete line of quality audio processing, plus Stereo,
        SAP (secondary audio program, primarily designed for public second
        language usage) and PRO channel (non-public use with integrated
        input limiter, data and telemetry inputs) generators. The audio
        processing was designed with surround sound compatibility in mind.
        Many first generation stereo users are converting over to the
        TVS-3000 series of products because of it surrond sound
        capabilities. 

             TVS-3001 The TVS-3001 is a state-of-the-art stereo
             television processing system that offers maximum control
             of the audio program material. It includes a precision
             tri-band AGC with horizontal sync rejection filter,
             exclusive CRL/CBS loudness control circuitry, reversed
             phase audio corrector and audio asymmetry removal
             circuits.

             TVS-3003 The TVS-3003 is a digitally synthesized MTS
             generator with dbx encoding, advanced transfer function
             pre-emphasis limiter and a proprietary stereo sound field
             enhancer.

             TVS-3004  The TVS-3004 Professional Channel (PRO)
             generator is a digitally synthesized subcarrier generator


          Page 6


             for non-public use with integrated input limiter, data
             and telemetry inputs.

             TVS-3005 The TVS-3005 is a digitally synthesized
             subcarrier generator for a secondary audio program (SAP)
             channel, primarily designed for public second language
             usage.


             BAP-2000 The BAP-2000 is a complete audio processor with
             horizontal sync 
             rejection filter for mono television applications.

         Noise Reduction Systems

              DX1 & DX2 For the professional audio and music industry, CRL
              manufactures noise reduction systems incorporating an
              integrated circuit patented under the dynafexR name. The
              dynafexR noise reduction system effectively reduces tap hiss
              and other background noises from virtually any audio source.
              The dynafex system is available in mono (DX1) and stereo
              (DX2). The dynafex chip is also utilized in all CRL products
              where possible.

         Test and Measurement

              DAA-50  With the conversion of audio technology to digital,
              CRL recognized the need for an inexpensive test and analysis
              tool and developed the DAA-50. The DAA-50 receives and
              decodes audio data. A variety of information about the signal
              can be determined through easily defined LED status indicator
              lights. Because of its compact size, light weight and
              partability, the DAA-50 can be used when and wherever it's
              needed.

         Technology Research and Development


              Tektronix AM70  CRL licensed certain digital audio testing
              technology to Tektronix. Tektronix's Pathfinder AM70 Audio
              Analyzer/Generator is the product of this combined effort.
              The AM70 is a handheld programmable audio product that
              operates in three modes: generator (serves as source of
              analog and digital signals), monitor (provides visual and
              audible output), and modify (allows real-time editing).


        New Products

        CRL introduced its DP-100 Digital Processor for the international
        and domestic FM market. Also new features and improvements were
        added to CRL's SC-100 RDS/RBDS generator for paging and billboard


          Page 7


        sign control. In addition, CRL is continuing to research and
        develop new products for release in the coming years.

        Research and Development

        This information is incorporated by reference to "Corporate
        Strategy" on page 3 of the 1996 Report and to that part of
        "Management's Discussion and Analysis" on page 8 of the 1996
        Report.

        Patents and Trademarks

        The Company holds eight United States patents including three
        acquired by purchase in July 1985 and a British patent.  These
        patents cover circuitry components that appear basic to the design
        of the Company's current audio processing equipment, AM Stereo and
        its dynafexR chip.  During 1993, the Company entered into a
        licensing agreement with Tektronics.  This information is
        incorporated by reference on page 7 of the 1996 Report.


        "CRL Systems", "CRL Audio" and "dynafexR" are registered trade
        names utilized by the Company.

        Backlog and Backlog Comparisons

        The backlog at December 31, 1996 was approximately $228,350
        compared to $566,720 at December 31, 1995.  The current backlog is
        expected to be filled within the current fiscal year.  Additional
        information is incorporated by reference to "Selected Financial
        Information" on page 1 of the 1996 Report.

        Effect of Existing or Probable Government Regulations


        The Company's current and forthcoming products are not regulated by
        any government.  The Company's domestic customers are highly
        regulated by the Federal Communications Commission ("FCC") and the
        Company's products perform certain audio processing to control a
        radio station's signals within FCC limits.  The Company's stereo
        generators assist its domestic customers in maintaining certain
        specifications set by the FCC. The Company's AM limiters and FM TV
        stereo generators assist its domestic customers in maintaining
        certain specifications set by the FCC.

        Competition

        Audio processing equipment for broadcast application is produced by
        several small companies with less than 100 employees.  Based on

          Page 8


        limited information available from Dun & Bradstreet, the largest of
        the companies providing audio processing equipment is Orban
        Associates, now a wholly-owned subsidiary of a US corporation.  The
        Company competes with Orban on the basis of uniqueness of design,
        quality and price.  Custom audio processing equipment is provided
        by several very small competitors.


        Marketing and Distribution

        This information is incorporated by reference to "Management's
        Discussion and Analysis" relative to results of operations on page
        8 of the 1996 Report and to Note 10 to the Company's Consolidated
        Financial Statements on page 22 of the 1996 Report.  In addition,
        reference is made to "Foreign Operations and Export Sales" on page
        9 of this Form 10-KSB.


        Warranties and Service

        The Company provides a one-year limited warranty against defects in
        product, materials and workmanship on it radio line equipment. The
        standard warranty for the DP-100, SC-100 and TV series products is
        three years.  Company employees perform all warranty and repair
        service at the Company's facilities.  Warranty claims have been
        minimal throughout the history of the Company.

        Delivery and Installation

        The Company delivers FOB its audio processing equipment for
        installation by the user.  For a fee, the Company will provide
        installation service or assistance.


        Seasonality


        Historically, sales of the Company's equipment have been seasonal
        in that demand tends to increase before and after market rating
        periods for radio stations.  The market rating periods for various
        areas are now staggered, making such seasonality less important.
        However, sales do increase after major trade shows, such as the
        National Association of Broadcasters.


        Sales Terms

        Company products are currently sold and shipped domestically with
        payment due 30 days from the invoice date.  Products returned in
        1996 were approximately 3.2% of sales.  International shipments are
        made against letters of credit or are prepaid by wire transfers.

          Page 9



        Dependence on Major Customers

        The current industry market is primarily comprised of individual
        and small group ownership's of the broadcast properties.  The
        Company, however, markets its products through wholesale
        distributors and agents.  Its largest wholesale distributor, Harris
        Allied Broadcast Equipment, Richmond, Indiana, accounted for  9% of
        net sales for the year ended December 31, 1996 and 17% of net sales
        for the year ended December 31, 1995 .  Additional information is
        incorporated by reference to Note 10 of the Company's Consolidated
        Financial Statements on page 22 of the 1996 Report.

        Production and Assembly


        The Company produces products at facilities in Tempe, Arizona.  The
        Company assembles certain components, particularly those utilizing
        proprietary information, and subcontracts certain other
        subassemblies.  Other components are purchased from manufacturers
        and included in the Company's final assembly.

        In a move to diversify, CRL purchased late in 1995, the assets,
        name and backlog of a small subcontractor, Desert Assemblies.
        Desert Assemblies has been CRL's contract printed circuit board
        assembler for several years with proven high quality and ontime
        delivery.  With the downsizing of many electronic manufacturers in
        the Phoenix area, the potential market for subcontract work
        expanded beyond the capacity of Desert Assemblies.  CRL had excess
        manufacturing capacity, including inventory handling.  This
        purchase allows a consolidation of the subcontract operation into
        the CRL facility making for a more efficient operation for both CRL
        and Desert Assemblies.  Desert Assemblies operates as a division of
        CRL.

        Sources and Availability of Raw Materials


        The Company has experienced no problems in obtaining needed
        components and materials.  However, because it purchases components
        and raw material from outside suppliers, the Company is dependent
        on those manufacturers and suppliers.  The Company has made
        informal arrangements with suppliers for materials and components,
        and has second and third sources of supply for most items.  The
        Company has attempted to exclude materials, parts, and supplies
        from its product designs for which availability is not reasonably
        assured.

        Compliance with Environmental Laws

        The Company believes that it is in compliance with all
        environmental laws and regulations applicable to its operations.

          Page 10



        Employees
        The Company employs 35 persons, 31 of whom are full-time, including
        clerical, sales, technical and manufacturing personnel, all in
        Tempe, Arizona.  The Company has not had, and does not expect to
        have difficulty in recruiting and training its labor force.


        Governmental Approval of Principal Products

        No governmental approval is required for the production and sale of
        any of the Company's products.  Certain international shipments
        require export licenses.

        Foreign Operations and Export Sales


        The Company has no foreign operations.  For the year ended December
         31, 1996, the Company's export sales totaled approximately
        $1,549,400 which was 61% of total sales.  All foreign  sales were
        made through CRL International, Inc., the Company's wholly-owned
        Foreign Sales Corporation, which was incorporated in Guam in
        January 1991.  The Company's 1996 export sales by region are as
        follows:

             Region                        Export Sales        Percentage

             Europe                        $  378,800               24%
             Pacific Rim                      716,100               46
             Latin and South America          139,000                9
             Canada and Mexico                151,300               10
             Other                            164,200               11

             Total                         $1,549,400              100%
                                                             
        ITEM 2 - DESCRIPTION OF PROPERTY

        In June 1983, the Company contracted for the purchase of land and
        construction of a building at 2522 West Geneva Drive, Tempe,
        Arizona.  In February 1984, the Company moved its operations into
        this 5,300 square foot building on a 37,500 square foot parcel of
        land that currently houses the Company's executive, administrative,
        sales and research facilities.  This property is subject to a
        mortgage collateralizing the property and is referred to in Note 7
        to the Company's Consolidated Financial Statements on page 20 of
        the 1996 Report.

        In August 1990, the Company entered into a contract for the
        construction of an addition to the existing building at 2522 West
        Geneva Drive.  The project was completed in January 1991 and was
        financed through cash reserves.  The 5,000 square foot addition is
        being utilized by corporate manufacturing. The Company believes its
        plant, equipment and offices are in good condition and are adequate
        for the Company's foreseeable future.

          Page 11


        It is the Company's policy to not invest in real estate other than
        that real estate necessary for the operations of the business.


        ITEM 3 - LEGAL PROCEEDINGS


        The Company is not involved in any material legal proceedings.

        ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matter was submitted to a vote of security holders during the
        fourth quarter of the fiscal year covered by this report.


          Page 12

                                      PART  II


        ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


        This information is incorporated by reference to "Stock Market
        Information" on page 23 of the 1996 Report.
        Over-the-counter market quotations reflect inter-dealer prices,
        without retail mark-up, mark-down or commission and may not
        necessarily represent actual transactions.
         

        ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS


        This information is incorporated by reference to "Management's
        Discussion and Analysis" on pages 8 through 11 of the 1996 Report.


        ITEM 7 - FINANCIAL STATEMENTS


        This information is incorporated by reference to the Consolidated
        Financial Statements on pages 12 through 22 of the 1996 Report.


        ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


          Page 13


                                      PART  III

        ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        PERSONS:            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
        ACT

             Name                Age                 Position


        Ronald R. Jones          49             Chief Executive Officer,
                                                President and a Director
        Gary D. Clarkson         44             Secretary/Treasurer and a 
                                                Director
        Erle M. Constable        78             Assistant Treasurer and a 
                                                Director
        Carl E. Matthusen        53             Director

        Gary M. Hamker           60             Director
        Dennis L. Drew           51             Vice President Operations, 
                                                Assistant 
                                                Secretary/Treasurer

                                     DIRECTORS


        Ronald R. Jones has been Chief Executive Officer and a director of
        the Company since its incorporation in 1978.  Mr. Jones founded
        Circuit Research Labs in 1974.  Since 1976, he has devoted his sole
        business efforts to the Company and its affiliates.  Prior to that
        time, Mr. Jones served as a consultant chief engineer for numerous
        radio stations.  He also taught courses in broadcast engineering at
        Phoenix College and the Institute of Broadcast Arts from 1974 to
        1976.  Mr. Jones holds an associate degree in electronics
        engineering technology from DeVry Institute of Technology, Phoenix,
        Arizona.  He is a member of the Institute of Electrical and
        Electronics Engineers and the Audio Engineering Society. Mr. Jones
        is President and a director of CRL International, Inc., the
        Company's wholly owned foreign sales corporation.


        Gary D. Clarkson has been Secretary and a director of the Company
        since its incorporation and in July 1992 was elected Treasurer.
        Mr. Clarkson founded Circuit Research Labs with Mr. Jones in 1974,
        and has devoted substantially all of his business efforts to the
        Company's business since that time.  He has been a design engineer
        for Circuit Research Labs from 1974 to present.  He holds an
        associate degree in electronics engineering technology from DeVry
        Institute of Technology, Phoenix, Arizona.  Mr. Clarkson served as
        assistant and chief engineer at many radio stations from 1971 until
        1978. Mr. Clarkson is Treasurer and a director of CRL
        International, Inc., the Company's wholly owned foreign sales
        corporation.



          Page 14


        Erle M. Constable has served as a director of the Company since
        1983 and Treasurer from January 1987 to November 1988 when he
        reduced his activity to Assistant Treasurer.  In 1983, Mr.
        Constable retired from Dynalectron Corporation (now DYNCORP), then
        a publicly-held diversified technical services company where he
        served as Vice President of Finance and Corporate Development.  He
        was employed by Dynalectron in 1973, and was in charge of an
        acquisition program which merged 15 companies into Dynalectron.
        Prior to joining Dynalectron, Mr. Constable worked for Fairchild
        Industries, Lockheed Aircraft Corporation, Glenn L. Martin Company
        and Trans World Airlines.  He holds undergraduate and masters
        degrees in business administration received in 1939 and 1940 from
        the University of Nebraska.  Periodically, Mr. Constable acts as a
        consultant to the Company and receives an hourly consulting fee for
        his services. Mr. Constable is a director of CRL International,
        Inc., the Company's wholly owned foreign sales corporation.


        Carl E. Matthusen has served as a director of the Company since
        February 1988.  Mr. Matthusen began his career in the broadcast
        industry in 1963 serving in various capacities at seven radio 
        broadcast stations in Arizona, Wisconsin, Minnesota and Virginia.
        Since 1978, he has been General Manager of KJZZ/Sun Sounds operated
        by the Mesa Community College in Mesa, Arizona.  In addition, he is
        a guest lecturer at Mesa Community College, Phoenix College and
        Arizona State University as well as a consultant to Arizona Western
        Community College and the Arizona Commission on Post-secondary
        Education.  Mr. Matthusen also served as Chairman of the Board of
        Directors of the National Public Radio Network from 1992 to 1996,
        where he has been a director from 1990 to 1996.

        Gary M. Hamker has been a member of the Board of Directors and a
        Special Projects Consultant since July 1993.  Mr. Hamker is retired
        from NCR/AT&T after 30 years in Marketing and Corporate Product
        Management.  While with NCR/AT&T he had many diversified
        assignments, including developing new domestic and international
        computer product strategies and product/marketing plans for the
        worldwide market.  He was instrumental in development and sales
        strategies of mini-computers and personal computer/network systems
        during their infancy.  Approval of research and development, new
        product specifications, monitoring R&D budgets, developing and
        approving new product plans and planning profitable products
        phase-out, were a few of his responsibilities.  His expertise
        includes working on system problems, on proposals to increase
        market penetration with large multi-national accounts and on
        developing internal communications to improve departmental
        cooperation and effectiveness.  Periodically, Mr. Hamker acts as a
        consultant to the Company and receives an hourly consulting fee for
        his services.


          Page 15



                              OTHER EXECUTIVE OFFICERS

        Dennis L. Drew joined the Company in 1993 as controller.  In 1994,
        he was appointed to the positions of Vice President of Operations,
        and Assistant Sectretary/Treasurer.  Before joining the Company,
        Mr. Drew spent three years as a Project Manager for Computer Cable
        Specialists. Prior to Computer Cable Specialists, Mr. Drew held
        several senior financial management positions with companies in the
        computer leasing industry.  These positions covered a wide range of
        responsibilities including implementing computerized internal
        controls to negotiating contracts and loan agreements.  Mr. Drew
        has an MBA from Arizona State University. 


          Page 16



        ITEM 10 - EXECUTIVE COMPENSATION

        The Company did not pay any individual cash compensation in excess
        of $100,000 for services provided during the fiscal year.  The
        following table sets forth compensation paid or accrued to the
        chief executive officer during each of the three years ended
        December 31, 1996.


                             Summary Compensation Table
        Name and                                               Other
        Principal Position  Year      Salary         Bonus     Compensation

        Ronald R. Jones
        President and
        Chairman of 
        the Board           1996     $ 72,696           -0-      $ 2,022(1)
                            1995       72,696           -0-        2,152(1)
                            1994       72,696           -0-        2,270(1)

        (1)  Fee paid by Company for the personal guarantee of the SBA
        loan.


        The Company has no employment contracts currently in force.  The
        Company has agreements with all employees calling for nondisclosure
        of trade secrets.

        The Company has group life, disability, and medical insurance
        plans, a 401(k) pension plan, and an Employee Stock Purchase Plan.
        The 1994 Stock Option Plan was approved by  the Company's
        shareholders  at the Company's annual meeting on May 6, 1994.  

        Compensation of Directors

        During the year ended December 31, 1996, directors received no
        compensation for attending meetings.


        Employee Pension Plan

        The Company sponsors the CRL, INC. 401(k) PROFIT SHARING PLAN (the
        "Plan") for the benefit of all employees meeting certain
        eligibility requirements.  Under the Plan, participants are
        permitted to make pre-tax contributions to their plan accounts.
        The Company will match 50% of a participant's contributions up to a
        maximum Company matching contribution of 3% of a participant's
        annual compensation.  Total annual contributions to a participant's
        account may not exceed 25% of annual compensation.  In addition,
        the Company, at its sole discretion, may make an annual profit
        sharing contribution to the Plan out of its current or accumulated
        profits.  The annual contribution, if any, is allocated to
        participants based upon each participant's annual compensation.

          Page 17


        The Company has not made an annual contribution and currently has
        no plans to do so.  The Company did not make a contribution to the
        account of the individual listed in the preceding cash compensation
        table for the year ended December 31, 1996.

        Stock Purchase Plan


        The Company has an employee stock purchase plan which is offered to
        substantially all employees, including officers.  Employees may
        purchase the Company's common stock through payroll deductions not
        exceeding $50 per week and shares are purchased at the market
        price, by a nonaffiliated dealer on the open market. During 1996,
        two employees participated in this plan.

        Stock Options

        The following is a brief summary of the Company's 1994 Stock Option
        Plan.  The closing bid price of the Company's common stock on the
        NASDAQ National Market System on February 28, 1997 was $2.125 per
        share.

        In May 1994, the Company's stockholders approved the Company's 1994
        Stock Option Plan, which set aside an aggregate of 60,000 shares
        of common stock for which options may be granted to employees,
        officers, directors, and consultants.  Options granted and not
        exercised under the Company's previous plan were canceled and new
        options were granted.  The Company's Board of Directors appoints
        the Stock Option Committee which is authorized to grant incentive
        stock options and non qualified stock options under the Plan,
        select optionees, determine the number of shares to be granted to
        each nominee, select the term of the option (up to ten years),  and
        determine the price to be paid on the exercise of the option,
        provided that such price must not be less than 100% of the market
        value of the shares subject to the option at the time it is
        granted.  Each option is exercisable from time to time subject to
        such restrictions on exercisability as the Stock Option Committee
        may impose at the grant date.  This plan expires in April 2004.  


        As of February 28, 1997, options to purchase a total of 10,312
        shares were outstanding to 5 employees and directors.

        The following table sets forth information as to all options to
        purchase Common Stock under the Plan which were granted to certain
        officers and directors and to all officers and directors as a group
        and which were outstanding as of February 28, 1997:



          Page 18



                                                                      Average 
        Name                Capacities               Shares           Price

        Erle M. Constable   Director and 
                            Assistant Treasurer     1,562(1)          $1.25

        Carl E. Matthusen   Director                1,250(2)          $1.25

        All officers and directors
        as a group (2 individuals)                  2,812(3)          $1.25

        (1) 1,562 shares granted  May 6, 1994.  All shares became  
            exercisable on  May 6, 1995 and expire  May 6, 1997.
        (2) 1,250 shares granted  May 6, 1994.  All shares  became
            exercisable on  May 6, 1995 and expire  May 6, 1997.
        (3) An additional 7,500 shares may be acquired by employees
            exercising options which expire May 6, 1997. 



          Page 19



        ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
                        MANAGEMENT

        A. Security Ownership of Certain Beneficial Owners

        As of February 28, 1997, the following persons were known by the

        Company to be the beneficial owners of more than 5% of the
        Company's Common Stock:
                                                 Amount and
                        Name and Address of      Nature of          Percent of
        Title of Class  Beneficial Owner         Beneficial Owner   Class(1)

        $.10 par value 
        common          Ronald R. Jones           187,500               31.4%

        $.10 par value 
        common          Gary D. Clarkson          121,312               20.3%
                                         All of
                             Circuit Research Labs, Inc.
                               2522 West Geneva Drive
                                Tempe, Arizona 85282
        (1)  On the basis of 597,682 shares outstanding on February 28,
        1997.

        B. Security  Ownership of Management

        The stock ownership by directors and officers of the Company as of
        February 28, 1997 is set forth below.  Each person named exercises
        sole voting power over all shares beneficially owned.
                                                  Amount and
                         Name and                 Nature of       Percent
                         Address of               Beneficial     of Class
        Title of Class   Beneficial Owner         Owner              (4)

        $.10 par value 

        common           Ronald R. Jones           187,500        31.2%
        $.10 par value 
        common           Gary D. Clarkson          121,312        20.2%
        $.10 par value 
        common           Erle M. Constable           2,500(1)        .4%
        $.10 par value 
        common           Carl E. Matthusen           1,250(2)        .2%
                                        All of

                             Circuit Research Labs, Inc.
                               2522 West Geneva Drive
                                 Tempe, Arizona 85282

        Officer and directors as 
        a group (4 persons)                        312,562(3)      52%

          Page 20


        (1)  938 shares owned; 1,562 shares under exercisable options.
             Held as community property with Eugenia Constable.
        (2)  No shares owned; 1,250 shares under exercisable options.
        (3)  Includes 2,812 shares which may be acquired by exercising
             stock options.
        (4)  Percentage is calculated on the basis that all director and
             officer shares under stock options presently exercisable are
             deemed outstanding, a total of 600,494 shares.



        ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        This information is incorporated by reference to Notes 7 and 8 of
        the Consolidated Financial Statements on pages 20-21 of the 1996
        Report.

        ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

        The following consolidated financial statements of Circuit Research
        Labs, Inc. and subsidiaries are included in the annual report of
        the registrant to its stockholders for the year ended December 31,
        1996 and are incorporated by reference in Item 7:

                     Consolidated balance sheets - December 31, 1996 and
                       1995.
                     Consolidated statements of operations - Years ended 
                       December 31, 1996 and 1995.
                     Consolidated statements of stockholders' equity - 
                       Years ended December 31, 1996 and 1995.
                     Consolidated statements of cash flows - Years ended 
                       December 31, 1996 and 1995.
                     Notes to consolidated financial statements - Years 
                       ended December 31, 1996 and 1995.


                                   Exhibit Index
         (a) Exhibit No.

             11   Schedule of computation of per share earnings - see page 
                  19.

             23   Consent of Deloitte & Touche LLP - see page 18


             In addition to the exhibits previously described, the Company 
             hereby incorporates the following exhibits by reference 
             pursuant to Rule 12B-32, each of which was filed as an 
             exhibit to the Company's Registration Statement on Form S-18 
             which was effective October 14, 1983, and subsequent filings 
             in a timely manner.

          Page 21


              3   Articles of Incorporation as Amended and Bylaws 
                  previously filed and incorporated herein by reference

             10   Stock Option Plan previously filed and incorporated 
                  herein by reference 1994 Stock Option Plan previously 
                  filed and incorporated herein by reference


             13   1996 Annual Report to Security Holders incorporated by 
                  reference Previous Annual Reports to Security Holders and
                  Forms 10-Q were previously filed in a timely manner and 
                  are incorporated herein by reference.

             21   Subsidiaries of the Registrant - CRL International, Inc. 
                  the Company's wholly-owned Foreign Sales Corporation was 
                  incorporated in Guam in January 1991.

         (b) Reports on Form 8-K

             No reports on Form 8-K were filed during the last quarter of 
             1996.


          Page 22



        INDEPENDENT AUDITORS' CONSENT

        We consent to the incorporation by reference in Registration
        Statement No. 33-82176 of Circuit Research Labs, Inc. on Form S-8
        of our report dated March 1, 1997 incorporated by reference in this
        Annual Report on Form 10-KSB of Circuit Research Labs, Inc. for the
        year ended December 31, 1996.



        DELOITTE & TOUCHE LLP

        Phoenix, Arizona

        March 26, 1997 


          Page 23


        CIRCUIT RESEARCH LABS, INC.

        SCHEDULE OF COMPUTATION OF PER SHARE EARNINGS
        YEARS ENDED DECEMBER 31, 1996 AND 1995


                                                           1996        1995
        PRIMARY(1)
             Average shares outstanding                  597,682     597,682

             Net effect of stock options which 
             are dilutive                                  2,222             
             
        TOTAL                                            599,904     597,682


        NET INCOME (LOSS)                             $  123,160    $306,720

        INCOME (LOSS PER COMMON SHARE)                      $.21      $(.51)

        (1) Fully diluted approximates primary.


          Page 24



        Signatures

        Pursuant to the requirements of Section 13 or 15(d) of the
        Securities Exchange Act of 1934, the registrant has duly caused
        this report to be signed on its behalf by the undersigned,
        thereunto duly authorized.

                                           CIRCUIT RESEARCH LABS, INC.
                                           Registrant
        Date:     March 29, 1997           By   /s/ Ronald R. Jones
                                           Ronald R. Jones, Chief Executive
                                           Officer and Chairman of the 
                                           Board

        Pursuant to the requirements of the Securities Exchange Act of
        1934, this report has been signed below by the following persons on
        behalf of the registrant and in the capacities and on the dates
        indicated.


        Date:     March 29, 1997           By   /s/ Ronald R. Jones
                                           Ronald R. Jones, Chief Executive
                                           Officer and Director (Principal 
                                           Executive Officer)

        Date:     March 29, 1997           By   /s/ Gary D. Clarkson
                                           Gary D. Clarkson, 

                                           Secretary/Treasurer and
                                           Director

        Date:     March 29, 1997           By   /s/ Dennis L. Drew
                                           Dennis L. Drew, Controller, Vice
                                           President Operations


        Date:     March 29, 1997           By   /s/ Erle M. Constable
                                           Erle M. Constable, Director

        Date:     March 29, 1996           By   /s/ Carl E. Matthusen
                                           Carl E. Matthusen, Director

        Date:     March 29, 1997           By   /s/ Gary M. Hamker
                                           Gary M. Hamker, Director

          Page 25


                            CIRCUIT RESEARCH LABS, INC.

        CORPORATE PROFILE

        Circuit Research Labs, Inc. (the "Company") is an electronics
        company developing, manufacturing and marketing high quality audio
        processing and transmission encoding equipment for the radio,
        television and professional audio markets world wide.

        The Company's main product lines control the audio quality and
        range of radio and television audio reception including generators
        allowing radio and television stations to broadcast in stereo.
        Professional sound reinforcement and digital audio test equipment
        is also produced having a wide range of applications.


        SELECTED FINANCIAL INFFORMATION

                                          YEARS ENDED DECEMBER 31
                         1996        1995        19  94     1993       1992    

        Operating Highlights

  Net sales        $2,524,870  $1,884,402  $2,074,716  $2,089,390 $2,098,422 
  Other income         16,860      26,524      29,596      29,119     47,386
  Total revenues    2,541,730   1,910,926   2,104,312   2,118,509  2,145,808

  Net income (loss)   123,160    (306,720)    (92,427)   (126,062)   (92,340)
                                                
  Net income (loss)
  per common share(1)     .21        (.51)       (.15)       (.21)      (.15)

  Weighted average 
  number of common
  shares outstanding(1) 599,904    597,682     597,682     597,682    597,685
            
  Balance Sheet Highlights

  Current assets    $1,431,175  $1,389,754  $1,466,831  $1,533,432  $1,666,304
  Current liabilities  239,811     321,974     133,355     154,272     145,007
  Total assets       2,169,590   2,149,670   2,236,761   2,357,265   2,514,126
  Long-term 
  obligations          122,287     138,458     112,354     119,514     159,578
  Total liabilities    362,098     460,432     245,709     273,786     304,585
  Stockholders' 
  equity             1,807,492   1,689,238   1,991,052   2,083,479   2,209,541
  No cash dividends have been declared.

            Key Statistics
  Current ratio          5.97         4.32       11.00        9.94        11.5
  Book value per
  share(1)              $3.02        $2.83       $3.33       $3.49       $3.70
  Working capital  $1,191,364   $1,067,780  $1,333,476  $1,379,160  $1,521,297
  Order backlog      $228,350     $566,720    $103,000    $227,000    $312,000
  Employees                35           25          20          26          24

          Page 1


                                    
                                CIRCUIT RESEARCH LABS, INC.



        Dear Shareholders:

        Your company was able to make delivery on a large number of the
        new DP-100 audio processors during 1996 utilizing our many hours
        of research and design.  This is a major step forward in
        technology enabling us to design and produce equipment in the
        digital mode so important to our customers and our competitive
        position.  

        As an indication of the acceptance of the newly designed product
        by the marketplace, CRL's net sales increased from $1.9 million in
        1995 to over $2.5 million in 1996, an increase of about 31
        percent.  The net profit of $123,160 compares with a 1995 loss of
        $306,720.

        Our shipments continue to be primarily in the international
        marketplace with over 61% of sales being made outside the U.S.
        I personally have spent a great portion of my sales effort abroad
        as the number of radio and TV stations overseas far outnumber the
        ones in the U.S.  Many of these stations are improving their
        equipment, opening up opportunities for sales of many of our
        products.

        The Company has other digital design based products in process for
        introduction in the near future which should assist in maintaining
        the momentum gained in 1996.

        CRL's work force is due a big "thank you" from all of us since the
        positive gains in 1996 are the result of everyone putting in a
        full effort to make this all happen.

        We again thank our shareholders who have maintained their
        investment during this period.

        Very truly yours,  


         
        Ronald R. Jones
        Chairman and President

        Page 2



        CIRCUIT RESEARCH LABS, INC.


        Corporate Overview

        Founded in 1974 as broadcast industry consultants, Circuit
        Research Labs built upon its understanding of the broadcast
        industry's needs by expanding into product development and
        manufacturing. In 1978, Circuit Research Labs, Inc., herein after
        referred to as the Company or CRL, was incorporated , and in late
        1983 became registered as a public company on the NASDAQ stock
        exchange.

        Since the first product, which was designed to improve the
        "coverage and quality" of low powered AM radio stations, CRL has
        been committed to improving broadcast quality. CRL's product lines
        have grown to include digital and analog audio processing and
        encoding devices for mono or stereo AM or FM radio, international
        short-wave and mono or stereo television, RDS/RBDS generators and
        receivers and digital audio analyzers. These products are labeled
        "CRL Systems".

        Corporate Strategy

        CRL is dedicated to serving the audio processing needs of the
        broadcast and professional audio markets with the highest quality
        products utilizing state-of-the-art technology. To achieve this
        goal requires a high level of research and development and CRL
        commits a large portion of its revenues to developing new products
        and constantly improving existing product performances. CRL also
        monitors new technology frontiers in our existing markets and
        others for possible product improvements. CRL has confidence in
        its engineers' expertise to develop new products on the leading
        edge of technology for the broadcast industry. 

        In order to prevent dependency on one market, when appropriate,
        consultants, licensing of technology and acquisition of product
        lines are also used to diversify operations.  CRL also encourages
        product engineering and development for other complementary
        broadcast manufacturers.  Examples include the development of
        digital audio analyzers and the acquisition of Desert Assemblies.

        CRL's production capabilities are constantly being improved and
        new marketing concepts are being developed to provide increased
        market share. Trusting in our dealers internationally and
        domestically for final product distribution, the CRL marketing and
        sales staff works directly in sales efforts with potential
        customers along with and for its dealers. Supported by an
        efficient customer service department, CRL maintains a reputation
        for excellent business ethics and selling standards.

        The Broadcast Industry and CRL

        CRL was a major participant in the National Radio Systems
        Committee (NRSC) which developed standards for AM stations adopted
        by the FCC. During 1987, CRL developed and produced equipment
        enabling AM stations to meet certain NRSC standards and, as a
        result, enjoyed an increase in sales and continued to be a market
        leader in AM processing.

        CRL is a member of the National Association of Broadcasters (NAB).
        The NAB is the world's largest, most extensive broadcaster's
        association, offering a wide variety of services to radio and
        television stations, as well as organizations that provide
        products and/or services to the broadcast industry.  CRL's staff
        contribute articles and technical papers to various NAB
        publications and participate in technical conferences.

        Page 3

        CRL is a member of the (Radio Data Systems) RDS Forum. The Forum
        promotes the exchange of experience between broadcasters and
        manufacturers on RDS system implementation and provides guidance
        to manufacturers on broadcasters' operational needs.  RDS is a
        system which enables a FM radio station to transmit digital data
        without interfering with the current audio signal.   

        In 1985, CRL purchased all rights to the patented dynafexR chip.
        The dynafexR noise reduction system effectively reduces tap hiss
        and other background noises from virtually any audio source. Two
        products are being produced under the dynafexR label and most CRL
        processors utilize the dynafexR chip.

        In the last quarter of 1995, CRL acquired Desert Assemblies, a
        contract electronic assemblies company. The acquisition of Desert
        Assemblies expands and enhances CRL's production capabilities. CRL
        now possesses the ability to design, build and test products for
        other companies (turnkey production).

        CRL holds several patents on component designs for CRL products
        within the broadcast industry.

        The Principal Products

        AUDIO PROCESSING PRODUCTS

        CRL's audio processing equipment for radio broadcast can be
        separated into four different series or product families, Digital
        Series, Modular Series, Amigo Series and the Signature Series.

        Page 5

        Digital Series

        The newest addition to CRL's radio processors is the Digital
        Series. CRL digital products are on the leading edge of technology
        with 100% digital architecture. The principal products are: 

             DP-100 Digital Processor  The CRL DP-100 digital
             processor is the newest addition to our FM processing
             line. It is currently the only digital audio processor
             to use 32 bit floating-point technology. Its advance
             design allows the unit to serve a long life in it
             customer's hands. The modular construction makes it
             possible for CRL to offer specific PCB upgrades without
             changing the main chassis. This design approach allows
             CRL to sell additional upgrade products to current users
             of the DP-100. The DP-100 FM digital processor gives a
             strong, high quality sound that attracts and holds the
             listening audience. The radio audience will enjoy a
             clear, bright and appealing sound that is easy to listen
             to for long periods of time. The DP-100 uses the latest
             digital technology to its fullest potential to produce
             the most advanced digital processor on the market. The
             DP-100 includes a true digital stereo multiplex
             generator, gated AGC (Audio Gain Controller), 5 band
             compressor, multi-band limiter and graphic equalizer.
             Also included is CRL's exclusive stereo sound
             enhancement and unique dynamic gating system.

             Page 4

             SC-100 RDS/RBDS (Radio Data Systems/Radio Broadcast Data
             Systems) allows a FM radio station to transmit
             additional streams of digital information giving the
             station new promotional methods, new public service
             opportunities and exciting new revenue possibilities.
             CRL's SC-100 is a RDS/RBDS generator using the latest in
             DSP (Digital Signal Processing) digital technology. The
             visual text message that the SC-100 sends to the new
             "smart radios" can be used for call letter and slogan
             recognition, traffic and weather reports, emergency
             alert messages and display advertising. The SC-100 can
             also be used for paging, billboard sign control, global
             positioning  plus other exciting applications. In
             addition, CRL has become a value added reseller of
             equipment  to build RDS/RBDS paging systems. CRL
             configures the system to the customer's requirements
             and, for an additional fee, oversees the installation of
             the system.

        Modular Series

        In its Modular Series, CRL designed the entire AM or FM processing
        chain as building blocks. As a result, the station can start
        simply, with just a limiter and stereo generator, for instance,
        and then add a compressor later as its processing needs change and
        its budget allows. The modular approach allows the radio station
        to buy just what it needs. The principal Modular systems are:

             FM1g  A basic FM audio processing system consisting of
             CRL's automatic gain controller (AGC) /limiter and
             digitally synthesized stereo generator.

             FM2g  A complete system with an AGC, a limiting system
             and digitally synthesized stereo generator.

             FM2g+ A comprehensive FM system with an AGC, a limiter,
             a digitally synthesized stereo generator and four band
             compressor.

             AM2m An AGC and a peak limiter are the two components of
             this basic mono AM system.

             AM4m CRL's most popular AM system is a three unit system
             consisting of an AGC, a modulation limiter and four band
             compressor.

             AM2s CRL's basic stereo AM system includes a stereo AGC
             and a limiter.

             AM4s Three components form CRL's enhanced stereo AM
             system. The system includes a stereo AGC, four band
             compressor/equalizer and matrix limiter.

        Amigo Series

        The next family of radio processing is the Amigo Series. The Amigo
        family of processors is an integrated "one box" processing system
        designed for the small to mid-size station in both international
        and domestic markets. The Amigo family of processors is the best
        performing processor in its class. The principal Amigo systems
        are:

             Amigo The Amigo is a combination of a dual band AGC, a
             variable pre-emphasis multi-band limiter and digitally
             synthesized stereo generator. The single unit contains a
             complete FM audio processing system. The Amigo is
             flexible and powerful, yet designed for easy set up and
             use. The Amigo FM is one of CRL's most popular selling
             systems.

             Amigo AM The Amigo AM is a complete stereo audio
             processing system. It includes CRL's patented AM stereo
             processing circuitry as found in the modular AM systems.
             The system includes a dual band AGC, triband limiter,
             and NRSC (National Radio Systems Committee) output
             filtering. The Amigo AM can be used on mono for
             customers waiting to convert to stereo.

             Page 5

             BAP-2000 A complete stand alone audio processor for any
             mono FM. The system consists of an advanced dual band
             audio AGC and limiter. Internal options selected by the
             radio station allow the BAP-2000 to be tailored to
             handle most any mono audio control job.

        Signature Series

        The Signature Series is a high performance audio processing
        system. The principal products are:

             Audio Signature The Audio Signature gives the  power of
         RESULTS OF OPERATIONS

             digital control with multi-band compression and limiting
             for high performance power. The FM Audio Signature
             includes a stereo AGC and four band compressor with a
             sophisticated set of processing controls to produce the
             radio station's own unique and distinctive sound.

             Modulation Signature The Modulation Signature features a
             digitally modulated stereo generator and a fully
             adjustable limiting system.

             Real Time Event Sequencer The Real Time Event Sequencer
             is a programmable event timer that can control any
             combination of eight outputs and store up to 255 events.
             Events can be programmed to the second for each day of
             the week, for each different month of the year. 

        Television Products

        CRL has a complete line of quality audio processing, plus Stereo,
        SAP (secondary audio program, primarily designed for public second
        language usage) and PRO channel (non-public use with integrated
        input limiter, data and telemetry inputs) generators. The audio
        processing was designed with surround sound compatibility in mind.
        Many first generation stereo users are converting over to the
        TVS-3000 series of products because of it surround sound
        capabilities. 

             TVS-3001 The TVS-3001 is a state-of-the-art stereo
             television processing system that offers maximum control
             of the audio program material. It includes a precision
             tri-band AGC with horizontal sync rejection filter,
             exclusive CRL/CBS loudness control circuitry, reversed
             phase audio corrector and audio asymmetry removal
             circuits.

             TVS-3003 The TVS-3003 is a digitally synthesized MTS
             generator with dbx encoding, advanced transfer function
             pre-emphasis limiter and a proprietary stereo sound
             field enhancer.

             TVS-3004  The TVS-3004 Professional Channel (PRO)
             generator is a digitally synthesized subcarrier
             generator for non-public use with integrated input
             limiter, data and telemetry inputs.

               TVS-3005 The TVS-3005 is a digitally synthesized
             subcarrier generator for a secondary audio program (SAP)
             channel, primarily designed for public second language
             usage.

             BAP-2000 The BAP-2000 is a complete audio processor with
             horizontal sync 
             rejection filter for mono television applications.

        Page 6

        Noise Reduction Systems

             DX1 & DX2  For the professional audio and music industry, CRL
             manufactures noise reduction systems incorporating an
             integrated circuit patented under the dynafexR name. The
             dynafexR noise reduction system effectively reduces tap hiss
             and other background noises from virtually any audio source.
             The dynafex system is available in mono (DX1) and stereo
             (DX2). The dynafex chip is also utilized in all CRL products
             where possible.

        Test and Measurement

             DAA-50  With the conversion of audio technology to digital,
             CRL recognized the need for an inexpensive test and analysis
             tool and developed the DAA-50. The DAA-50 receives and
             decodes audio data. A variety of information about the signal
             can be determined through easily defined LED status indicator
             lights. Compact and light weight, the DAA-50 can be used when
             and wherever it's needed.

        Technology Research And Development

             Tektronix AM70  CRL licensed certain digital audio testing
             technology to Tektronix. Tektronix's Pathfinder AM70 Audio
             Analyzer/Generator is the product of this combined effort.
             The AM70 is a handheld programmable audio product that
             operates in three modes: generator (serves as source of
             analog and digital signals), monitor (provides visual and
             audible output), and modify (allows real-time editing).


        New Products

        New features and improvements were added to CRL's DP100 Digital
        Processor and SC-100 RDS/RBDS generator for paging. In addition,
        CRL is continuing to research and develop new products for release
        in the coming years.

          Page 7

        CIRCUIT RESEARCH LABS, INC.

        MANAGEMENT'S DISCUSSION AND ANALYSIS 
        YEARS ENDED DECEMBER 31, 1996 AND 1995

        RESULTS OF OPERATIONS

        The following tables set forth financial information for each of
        the four quarters of the year ended December 31, 1996 and for the
        years ended December 31, 1996 and 1995.
                            
                                       1996 Quarters Ended                     

                                March 31   June 30  September 30  December 31

    Net sales                   $607,264  $599,761      $631,295     $686,550

    Other income                   5,005     3,461         4,215        4,179

    Total revenues              $612,269  $603,222      $635,510     $690,729

    Gross margin on net sales   $390,921  $354,460      $360,987     $291,296
    Gross margin percent            64%       59%          57%          42%

    Net income                   $21,232  $ 30,970       $64,984       $5,974
    Net  income percent              3%        5%           10%         .01%

    Income per share               $.04      $.05         $.10         $.01

                                                   Years Ended    December 31
                                                           1996         1995    

        Net sales                                     $2,524,870    $1,884,402
        Other income                                      16,860        26,524
        Total revenues                                $2,541,730    $1,910,926

        Gross margin on net sales                     $1,397,664    $1,188,266
        Gross margin percent                                 55%        63%


        Net income (loss)                               $123,160     $(306,720)
        Net income (loss) percent                             5%         (16)%
        Income (loss) per share                             $.21      $.(.51)

        Net sales in 1996 increased 34% to $2,525,000 compared  to
        $1,884,000 for 1995. The increase is the result of increased sales
        of CRL's audio processing equipment, the sales of package paging

        Page 8

        systems that compliment the sales of CRL's SC100, and revenues
        from CRL's circuit board assembly division.

        Cost of goods sold in 1996 was 45% of net sales compared to 37% in
        1995. The increase is the result of the expected lower profit
        margins in the sales of package paging systems and CRL's circuit
        board assembly division. The cost of goods sold on CRL's main
        product lines for the year ended December 31, 1996 was 38% which
        was consistent with 37% for the same period of 1995.

        Selling, general and administrative expense in 1996 of  $996,000
        was comparable to the selling, general and administrative expense
        in 1995 of  $1,056,000. The $60,000 decrease was due primarily to
        a decrease in domestic and international marketing costs including
        travel and trade show costs. 

        Research and development expense for the period ended December 31,
        1996 was $272,000 a decrease of $158,000 compared to the same
        period of 1995 of $430,000. The decrease was the result of lower
        developmental cost on the new product lines and lower labor cost
        resulting from not having contract engineers on staff.  

        Interest and other income of $17,000 for the period ended December
        31, 1996 was $10,000 lower than for the same period  of 1995 of
        $27,000. The decrease was due to lower income from investments as
        a result of the decrease in funds invested.  

        FINANCIAL CONDITION

        At December 31, 1996, the Company had net working capital of
        $1,191,000 and a current ratio of 5.97 to 1.   CRL believes that
        its financial resources are adequate to fund its operations in
        1997 and will continue to finance operations from its existing
        sources of cash. 

        The Company's credit line expired on  July 1, 1996, and since it
        had not been used, the Company did not pursue its renewal. The
        Company believes future liquidity needs will be met by a
        combination of cash generated from operating activities, the
        reduction of investments, and existing cash balances.

        Receivables at December 31, 1996 of $190,000 were consistent with
        the December 31, 1995 balance of $162,000. Our credit policy
        remains the same as in previous years, with letters-of-credit for
        international shipments and short-term extension of payment terms
        to domestic dealers.

        Inventories of $956,000 at December 31, 1996 increased $119,000
        compared to $837,000 of inventories at December 31, 1995. The
        increase is the result of raw material purchases for the
        production of the new product, the DP-100.

        There were no major capital expenditures in 1996 and none are
        contemplated for 1997.
        
        The document includes "forward-looking" statements within the
        meaning of the Private Securities Litigation Reform Act of 1995.
        Management's anticipation of future events is based upon
        assumptions regarding levels of competition, research and
        development results, raw material markets, the markets in which
        the Company operates, and stability of the regulatory environment.
        Any of these assumptions could prove inaccurate, and therefore
        there can be no assurance that the forward-looking information
        will prove to be accurate.

          Page 9

        CIRCUIT RESEARCH LABS, INC.

        MANAGEMENT'S DISCUSSION AND ANALYSIS 
        YEARS ENDED DECEMBER 31, 1995 AND 1994

        RESULTS OF OPERATIONS

        The following tables set forth financial information for each of
        the four quarters of the year ended December 31, 1995 and for the
        years ended December 31, 1995 and 1994.

                                            1995  Quarters Ended       


                                March 31  June 30  September 30  December 31


    Net sales                   $537,185 $422,865      $488,577     $435,775
    Other income                   6,006    7,167         4,887        8,464

    Total revenues              $543,191 $430,032      $493,464     $444,239

    Gross margin on net sales   $358,627 $283,925      $306,042     $239,672
    Gross margin percent            67%       67%          63%          55%

    Net income  (loss)            $2,483 $(47,261)    $(85,713)    $(176,229)
    Net  income (loss) percent       0%     (11)%        (17)%         (40)%

    Income (Loss) per share        $.00    $(.08)       $(.14)        $(.29)


                                                     Years Ended December 31
                                                          1995          1994    

        Net sales                                     $1,884,402    $2,074,716
        Other income                                      26,524        29,596
        Total revenues                                $1,910,926    $2,104,312

        Gross margin on net sales                     $1,188,266    $1,308,855
        Gross margin percent                                 63%          63%

        Net loss                                      $(306,720)    $( 92,427)
        Net loss percent                                   (16)%          (4)%
        Loss per share                                    $(.51)      $.(.15)


        Net sales in 1995 at $1,884,402 were lower compared  to $2,074,716
        for 1994.  The decrease was the result of lower international

          Page 10


        demand for the Company's radio products.  The percentage of
        international sales also decreased to 55% or $1,028,842 compared
        to 66%, or $1,364,200 for 1994.

        Cost of goods sold in 1995 was 37% which was comparable to 1994 at
        37%.

        Selling, general and administrative expense in 1995 of  $1,056,000
        was comparable to the selling, general and administrative expense
        in 1994 of  $1,074,700.  

        Research and development expense for the period ended December 31,
        1995 was $429,600, an increase of $70,900 compared to the same
        period of 1994 of $358,700. The increase was the result of
        contract engineering work on the new products, the DP-100 and the
        RDS/RBDS units.  

        Interest and other income of $26,500 for the period ended December
        31, 1995 was comparable to the same period  of 1994 of $29,600.  

        FINANCIAL CONDITION

        At December 31, 1995, the Company had net working capital of
        $1,067,800 and a current ratio of 4.32 to 1. The increase in
        liabilities was due to the purchase of Desert Assemblies.

        Receivables at December 31, 1995 of $162,200 decreased $47,400
        from December 31, 1994 balance of $209,600 as a result of
        decreased sales in 1995 and a receivable for royalties due on the
        licensing agreement with Tektronics in 1994.

        Inventory of $836,600 at December 31, 1995 increased $125,600
        compared to $711,000 of inventory at December 31, 1994.  The
        increase is the result of raw material purchases for the
        production of the new product, the DP-100.

        CRL purchased late in 1995 the assets, name and backlog of a small
        subcontractor, Desert Assemblies.  Desert Assemblies has been
        CRL's contract printed circuit board assembler for several years
        with proven high quality and ontime delivery.  With the downsizing
        of many electronic manufacturers in the Phoenix area, the
        potential market for subcontract work expanded beyond the capacity
        of Desert Assemblies.  CRL had excess manufacturing capacity,
        including inventory handling.  This purchase allows a
        consolidation of the subcontract operation into the CRL facility
        making for a more efficient operation for both CRL and Desert
        Assemblies.  Desert Assemblies will be operated as a division of
        CRL

        There were no other major capital expenditures in 1995.

          Page 11

        INDEPENDENT AUDITORS' REPORT

        Board of Directors and Stockholders
        Circuit Research Labs, Inc.
        Tempe, Arizona

        We have audited the accompanying consolidated balance sheets of
        Circuit Research Labs, Inc. and its subsidiaries as of December
        31, 1996 and 1995, and the related consolidated statements of
        operations, stockholders' equity and cash flows for the years then
        ended.  These financial statements are the responsibility of the
        Company's management.  Our responsibility is to express an opinion
        on these financial statements based on our audits.

        We conducted our audits in accordance with generally accepted
        auditing standards.  Those standards require that we plan and
        perform the audit to obtain reasonable assurance about whether the
        financial statements are free of material misstatement.  An audit
        includes examining, on a test basis, evidence supporting the
        amounts and disclosures in the financial statements.  An audit
        also includes assessing the accounting principles used and
        significant estimates made by management, as well as evaluating
        the overall financial statement presentation.  We believe that our
        audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present
        fairly, in all material respects, the financial position of
        Circuit Research Labs, Inc. and its subsidiaries at December 31,
        1996 and 1995, and the results of their operations and their cash
        flows for the years then ended in conformity with generally
        accepted accounting principles.




        DELOITTE & TOUCHE LLP
        Phoenix, Arizona

        March 1, 1997


          Page 12


        CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

        CONSOLIDATED BALANCE SHEETS
        DECEMBER 31, 1996 AND 1995                                        
                                                                  

        ASSETS                                            1996        1995   

        CURRENT ASSETS:
            Cash                                    $    48,048  $   25,974
            Securities available-for-sale (Note 3)      167,961     297,667
            Accounts receivable, less allowance 
             for doubtful accounts of $6,520 in 
             1996 and $16,500 in 1995                   189,616     162,242
            Inventories (Note 4)                        955,922     836,628
            Prepaid expenses and other                   69,628      67,243 
                 Total current assets                 1,431,175   1,389,754


        PROPERTY, PLANT AND EQUIPMENT - Net 
        (Notes 5 and 7)                                 578,564     594,152
        OTHER ASSETS - Net                              159,851     165,764
        TOTAL                                        $2,169,590  $2,149,670

        LIABILITIES AND STOCKHOLDERS' EQUITY

        CURRENT LIABILITIES:
            Accounts payable                       $     64,650  $   91,401
            Accrued salaries and benefits                65,699      58,004
            Accrued professional fees                    21,976      27,405
            Customer deposits                            40,432      99,818
            Other accrued expenses and liabilities       31,826      26,210
            Current portion of long-term debt (Note 7)   15,228      19,136  
            Total current liabilities                   239,811     321,974
         
        LONG-TERM DEBT, Net of current portion (Note 7) 122,287     138,458
                 Total liabilities                      362,098     460,432

        STOCKHOLDERS' EQUITY (Note 8):
            Preferred stock, $100 par value - 
            authorized, 500,000 shares, none issued
            Common stock, $.10 par value - 
            authorized, 20,000,000 shares, 597,682 
            shares issued and outstanding                59,768      59,768
            Additional paid-in capital                1,247,240   1,247,240
            Retained earnings                           500,484     377,324
            Unrealized appreciation on securities
            available-for-sale                                        4,906
                  Total stockholders' equity          1,807,492   1,689,238
        TOTAL                                        $2,169,590  $2,149,670

        See notes to consolidated financial statements.

        Page 13        

        CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

        CONSOLIDATED STATEMENTS OF OPERATIONS
        YEARS ENDED DECEMBER 31, 1996 AND 1995                            
                                                   

                                                          1996           1995   

        NET SALES (Note 10)                          $2,524,870     $1,884,402

        COST OF GOODS SOLD                            1,127,206        696,136

                       Gross profit                   1,397,664      1,188,266

        OPERATING EXPENSES (Note 11):
            Selling, general and administrative         995,882      1,055,950
            Research and development                    272,354        429,630


                       Total operating expenses       1,268,236      1,485,580

        INCOME (LOSS) FROM OPERATIONS                   129,428       (297,314)

        OTHER INCOME (EXPENSE):
           Interest and other income                    16,860          26,524 
           Interest expense                            (23,078)        (13,989)

                       Total other (expense) income     (6,218)         12,535

        INCOME (LOSS) BEFORE INCOME TAX 
        PROVISION (BENEFIT)                             123,210       (284,779)
         
        INCOME TAX PROVISION (BENEFIT) (Note 9):
           Current                                           50        ( 8,059)
           Deferred                                                     30,000 
                       Total income tax provision 
                       (benefit)                             50         21,941

        NET INCOME (LOSS)                            $  123,160     $ (306,720)

        INCOME (LOSS) PER COMMON SHARE                    $ .21          $(.51)

        WEIGHTED AVERAGE NUMBER OF COMMON 
        AND COMMON EQUIVALENT SHARES OUTSTANDING        599,904        597,682

        See notes to consolidated financial statements.


          Page 14


        CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES


        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
        YEARS ENDED DECEMBER 31, 1996 AND 1995                            
                                                   



                                                  Unrealized
                            Additional           Appreciation
                   Common   Paid-in    Retained  On Securities
                    Stock   Capital    Earnings  Available-for-Sale   Total

BALANCE,
JANUARY 1, 1995    $59,768  $1,247,240   $ 684,044                  $1,991,052

Unrealized
appreciation on
securities
available-for-sale                                       $4,906          4,906

Net los s                                 (306,720)                   (306,720)
       
BALANCE,
DECEMBER 31, 1995    59,768   1,247,240    377,324        4,906      1,689,238

Unrealized 
depreciation on
securities 
available-for-sale                                       (4,906)        (4,906)

Net income                                 123,160                     123,160
        
BALANCE,
DECEMBER 31, 1996    59,768 $1,247,240   $ 500,484         $0       $1,807,492

See notes to consolidated financial statements. 


          Page 15


        CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

        CONSOLIDATED STATEMENTS OF CASH FLOWS
        YEARS ENDED DECEMBER 31, 1996 AND 1995                            
                                                  
         

                                                      1996          1995   

        OPERATING ACTIVITIES: 
        Net income (loss)                           $123,160    $ (306,720)
        Adjustments to reconcile net income (
        loss)  to net cash used in
           operating activities:
           Depreciation and amortization              80,958         77,867
           Deferred income taxes                                     30,000
           Changes in assets and liabilities:
                 Accounts receivable                 (27,374)        47,355
                 Income taxes receivable                             13,000
                 Inventories                        (119,294)      (125,582)
                 Prepaid expenses and other           (2,385)         7,016     
                 Other assets                          4,832           (452)
                 Accounts payable and accrued
                 expenses                            (78,255)       176,652  
                            
                         Net cash used in operating
                         activities                  (18,358)       (80,864)
        
        INVESTING ACTIVITIES:
            Capital expenditures                     (65,370)        (40,552)
            Purchase of securities                  (264,931)       (396,049)
            Proceeds from sale or maturity
            of securities                            389,731         425,000
            Payments received on stockholder notes     1,081           3,381   
                         Net cash provided by
                        (used in) investing
                         activities                   60,511          (8,220)

        FINANCING ACTIVITIES -  
             Principal payments on long-term debt    (20,079)         (7,159)
                                               
               NET INCREASE (DECREASE) IN CASH        22,074         (96,243)
        
        CASH, BEGINNING OF YEAR                       25,974          122,217
        CASH, END OF YEAR                          $  48,048        $  25,974


        SUPPLEMENTAL CASH FLOW INFORMATION:
             Cash paid for interest                $  23,078       $   13,989
            
             Debt issued to purchase Desert
             Assemblies                                            $   45,230

         See notes to consolidated financial statements.


          Page 16


        CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        YEARS ENDED DECEMBER 31, 1996 AND 1995                            
                                                   

        1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            Principles of Consolidation - The consolidated financial
            statements include the accounts of Circuit Research Labs, Inc.
            and its wholly-owned subsidiaries:  CRL Systems, Inc., National
            Communications Research Center, Inc. ("NCRC") and CRL
            International, Inc. (collectively, the "Company").   
            Significant intercompany accounts and transactions have been
            eliminated in consolidation.

            Securities available-for-sale are securities being held for
            indefinite periods of time, including securities that
            management intends to use for liquidity needs or that may be
            sold in response to changes in interest rates, prepayments or
            other factors and are carried at estimated fair value, with the
            net, after-tax unrealized gain or loss recorded as a separate
            component of stockholders' equity with no effect on current
            results of operations..  Realized gains and losses are included
            in other income and are computed using specific identification.

            Inventories are stated at the lower of cost (first-in,
            first-out method) or market.

            Property, plant and equipment are stated at cost.  Depreciation
            is computed using the straight-line method over the estimated
            useful lives of the related assets ranging from 3 years to 31.5
            years.

            Other assets consist principally of  cash surrender values on
            officers' life insurance, patents which are stated at cost less
            amortization computed on the straight-line method over the
            underlying asset's estimated useful life and certain
            intangibles acquired from Desert Assemblies.  Accumulated
            amortization of patents was $36,979 and $35,831 at December 31,
            1996 and 1995, respectively.

            Income Taxes - Income tax expense is calculated under the
            liability method as required under Statement of Financial
            Accounting Standards ("SFAS") No. 109.  Under the liability
            method, deferred tax assets and liabilities are determined
            based upon the differences between financial statement carrying
            amounts and the tax bases of existing assets and liabilities
            and are measured at the tax rates that will be in effect when
            these differences reverse.

            Revenue is recognized on sales of products at the time of
            shipment.

            New accounting pronouncements - In October 1995, the Financial
            Accounting Standards Board issued SFAS No. 123 "Accounting for
            Stock Based Compensation".  The Company has determined that it

            will not change to the fair value method and will continue to
            use Accounting Principles Board Opinion No. 25 for measurement
            and recognition of employee stock based compensation.

            Use of estimates - The preparation of financial statements in
            conformity with generally accepted accounting principles
            necessarily requires management to make estimates and
            assumptions that affect the reported amounts of assets and
            liabilities and disclosure of contingent assets and liabilities
            at the date of the financial statements and the reported
            amounts of revenues and expenses during the reporting period.
            Actual results could differ from these estimates.

           Page 17
            
            Financial instruments - SFAS No. 107 "Disclosures About Fair
            Value of Financial Instruments" was adopted for the year ended
            December 31, 1995.  SFAS No. 107 requires disclosures of the
            estimated fair value of certain financial instruments. The
            Company has estimated the fair value of its financial
            instruments using available market data. However, considerable
            judgment is required in interpreting market data to develop
            estimates of fair value. The use of different market
            assumptions or methodologies may have a material effect on the
            estimates of fair value.  The carrying values of cash,
            securities available-for-sale, receivables, accounts payable
            and long-term debt approximate fair values due to the
            short-term maturities or market rates of interest of these
            instruments.

            Research and development costs are charged to expense as
            incurred.

            Income (loss) per common share is based on the weighted average
            number of  shares outstanding during each period, after giving
            effect for any dilutive stock options, which are considered to
            be common stock equivalents.  For the year ended December 31,
            1995, options that would otherwise qualify as common stock
            equivalents are excluded because their inclusion would be
            antidilutive.

            Reclassifications - Certain reclassifications were made to the
            1995 financial statements to conform with the 1996 presentation.

        2.  DESCRIPTION OF BUSINESS

            The Company develops, manufactures and markets audio
            processing and transmission encoding equipment for the
            broadcast and professional entertainment industries. In
            addition ,the Company has become a value added reseller of
            equipment  to build RDS/RBDS paging systems. CRL configures
            the system to the customer's requirements and for an
            additional fee, can oversee the installation of the system.
            The Company also acts as a subcontractor for circuit board
            assemblies, since December 4, 1995 when it purchased certain
            assets of Desert Assemblies, a former contractor and
            sub-assembler for the Company.

        3.  SECURITIES  AVAILABLE-FOR-SALE

            SFAS No. 115 "Accounting for Certain Investments in Debt and
            Equity Securities" requires the classification of securities at
            acquisition into one of three categories: held-to-maturity,
            available-for-sale or trading -- with different reporting
            requirements for each classification.  All of the Company's
            marketable securities are classified as available-for-sale. The
            fair value of the Company's securities are estimated based on
            quoted market prices for those or similar instruments.

            A summary of the Company's  securities is as follows at
            December 31:  

                                                         1996      1995  
            Amortized cost:
                Preferred stocks                       $ 50,000 $  50,000
                United States Treasury bonds            117,961   242,761 
                       Total                           $167,961  $292,761

            Page 18

                Estimated fair value:
                Preferred stocks                       $ 50,000 $  54,500
                United States Treasury bonds            117,961   243,167
                       Total                           $167,961  $297,667

            Gross unrealized holding gains                         $4,906

            At December 31, 1996, the United States Treasury bonds mature
            within one year.

        4.  INVENTORIES

            Inventories consist of the following at December 31:
            
                                                           1996      1995  
            Raw materials and supplies                 $335,072  $437,368 
            Work in process                             314,291   169,640
            Finished goods                              306,559   229,620
            Total                                      $955,922  $836,628


        5.  PROPERTY, PLANT AND EQUIPMENT

            Property, plant and equipment consist of the following at
            December 31:

                                                         1996       1995   

            Land                                   $  130,869  $ 130,869
            Building and improvements                 497,004    497,004
            Furniture and fixtures                    397,546    383,523
            Machinery and equipment                   616,081    564,734
            Total                                   1,641,500  1,576,130
            Less accumulated depreciation           1,062,936    981,978
            Property, plant and equipment - net   $   578,564 $  594,152

        6.  CREDIT ARRANGEMENTS

            The Company's line of credit commitment expired July 1, 1996
            and since it had not been used, the Company did not pursue it
            renewal. The Company believes its future liquidity needs will
            be met by a combination of cash generated from operating
            activities, the reduction of investments and existing cash
            balances.

        Paage 19

        7.  LONG-TERM DEBT

            Long-term debt consists of the following at December 31:
                                                            1996     1995
            12.7% mortgage note collateralized by
            the Company's operating facility requiring
            monthly principal and interest payments of 
            $1,913 through April 2004                   $104,385  $112,364

            Noninterest-bearing note issued in 
            connection with acquisition of Desert 
            Assemblies, requiring annual payments of
            $11,000 through January 2000                  39,000    55,000

            Less unamortized discount based on 
            imputed interest rate of 10%                 (5,870)    (9,770)
            Total                                       137,515    157,594
            Less current portion                        (15,228)   (19,136)
            Long-term debt, net of current portion     $122,287   $138,458

            Principal payments on long-term debt are scheduled as follows:
            1997, $15,228; 1998, $18,626; 1999, $20,894; 2000, $23,478,
            2001, $15,287 and $44,002, thereafter.

            The Board of Directors of the Company has elected to provide
            compensation to two principal stockholders for their
            continuing guarantee of the long-term note payable for the
            Company's operating facility.  Such compensation is calculated
            at 3% of the outstanding balance of the long-term note payable
            at each fiscal year-end .

        8.  STOCKHOLDERS' EQUITY

            In May 1994, the Company's stockholders approved the Company's
            1994  Stock Option Plan, which set aside an aggregate of
            60,000 shares of common stock for which options may be granted
            to employees, officers, directors, and consultants.  Options
            granted and not exercised under the Company's previous plan
            were canceled and new options were granted.  The Company's
            Board of Directors appointed the Stock Option Committee which
            is authorized to grant incentive stock options and non
            qualified stock options under the Plan, select optionees,
            determine the number of shares to be granted to each nominee,
            select the term of the option (up to ten years),  and
            determine the price to be paid on the exercise of the option,
            provided that such price must not be less than 100% of the
            market value of the shares subject to the option at the time
            it is granted.  Each option is exercisable from time to time
            subject to such restrictions on exercisability as the Stock
            Option Committee may impose at the grant date.    This plan
            expires in April 2004.  

          Page 20

            Information with respect to stock option activity follows:

                                                             Option Price
                                                      Shares    Per Share


            Outstanding at January 1, 1995            14,062       $1.25 
            Cancelled                                      0 
            Issued                                         0 
            Outstanding at December 31, 1995          14,062       $1.25
            Cancelled                                  3,750       $1.25
            Issued                                         0 
            Outstanding at December 31, 1996          10,312       $1.25

            All options are currently exercisable, and the expiration date
            is May 6, 1997.  The aggregate exercise price of options
            outstanding at December 31, 1996 was $12,890.

            Preferred stock may be issued in amounts with such
            designations, preferences, voting rights, privileges and such 
            other restrictions and qualifications as the Board of
            Directors may establish.  No preferred stock has been issued. 

        9.  INCOME TAXES

            The principal reasons for the difference between the income tax
            provision (benefit) and the amounts computed by applying the
            statutory income tax rates to income (loss) before income tax
            provision (benefit) for the years ended December 31, are as
            follows:
                                                         1996       1995  

            Federal tax at statutory rates            $31,000    $(88,300)
            State tax at statutory rates               11,000     (25,600)
            Dividends deduction                         1,200      (1,300)
            Officers' life insurance                    4,300       3,400 
            Use of net operating loss                 (47,450)         
            Other                                                  (6,259)
            Increase in valuation allowance                       140,000 

            Total                                         $50      21,941

        At December 31, the deferred taxes represent the tax effect of
        temporary differences related to:

        
                                                         1996       1995   
            Current deferred taxes:
               Inventory capitalization             $  22,300  $  25,900
               Prepaid expenses                       (24,900)   (26,900)
               Inventory obsolescence reserve          40,100     30,200
               Allowance for doubtful accounts          2,600      6,600
               Other                                      500  
               Deferred tax valuation allowance       (40,600)   (35,800)
              
            Total                                      $    0  $      0

        Page 21
       
              Non-current deferred taxes:
               Depreciation                        $  (28,000)   $(22,000)
               Operating loss carryforward             70,500     161,500 
               Federal general business credit
               carryforward                            85,000      85,000
               Other                                    2,700       3,200
               Deferred tax valuation allowance      (130,200)   (227,700)
            Total                                   $       0    $      0
         
            At December 31, 1996, a valuation allowance totaling $ 170,800
            was recorded which relates to, among other items, federal  and
            state net operating losses and federal general business credit 
            carryforwards for which the utilization is not reasonably assured.
            Net operating loss carryforwards of approximately $170,000 which 
            expire through 2010 are available for federal income tax purposes.

         10.SALES TO MAJOR CUSTOMERS AND EXPORT SALES

            Sales during the two years ended December 31, 1996 were
            conducted primarily through wholesale distributors and
            dealers.  One wholesale distributor accounted for approximately
            9% of net sales for the year ended December 31, 1996 and  17% of
            net sales for the year  ended December 31, 1995.

            International sales in 1996 and 1995 totaled approximately
            $1,549,400 and $1,029,000, respectively. Foreign sales are made 
            through the Company's wholly-owned foreign sales corporation.
            The Company requires that all sales be paid in U.S. currency.
            Accordingly, there are no foreign currency gains or losses for the 
            years ended December 31, 1996 or 1995.  The Company's export 
            sales by region are as follows:

                                           Export   Sales                    

            Region                      1996        %     1995        %  

            Europe                    $ 378,800   24%$   233,100    23%
            Pacific Rim                 716,100   46     363,900    35   
            Latin and South America     139,000    9     121,800    12   
            Canada and Mexico           151,300   10     124,600    12   
            Other                       164,200   11     185,600    18  
                                Total $1,549,400 100% $1,029,000    100%
        
            11. EMPLOYEE BENEFIT PLAN

           As of January 1, 1991, the Company adopted a 401(k) profit
           sharing plan (the "Plan") for the   benefit of all employees who
           meet certain eligibility requirements.  The Company will match 
           50% of employee contributions up to a maximum contribution by
           the Company of 3% of a participant's annual compensation.  Total
           annual contributions to a participant's account may not exceed 25%
           of compensation. Company contributions made to the Plan were $13,189
           and $15,498 in 1996 and 1995, respectively.
  
        Page 22 

        CIRCUIT RESEARCH LABS, INC.

        STOCK INFORMATION

        The Company's common stock is publicly traded in the
        over-the-counter market (NASDAQ symbol: CRLI) and commenced
        trading on November 4, 1983.  As of  February 28, 1997, there were
        597,682 shares of common stock issued and outstanding, with an
        estimated 324 stockholders of record.  The following table sets
        forth the high and low closing bid prices as reported by the
        National Association of Securities Dealers Automated Quotations
        (NASDAQ).
         
                                             1996 - Quarters Ended       

                               March 31  June 30  September 30  December 31
        Bid Quotation Range

        High                     $1.63    $1.75      $1.63        $1.94
        Low                      $1.25    $1.50      $1.50        $1.63

                                             1995 - Quarters Ended

                               March 31  June 30  September 30  December 31
        Bid Quotation Range

        High                     $1.75    $2.00      $1.68      $1.63
        Low                      $1.38    $1.63      $1.13      $1.38


        Over-the-counter market quotations reflect inter-dealer prices,
        without retail mark-up, mark-down or commission and may not
        necessarily represent actual transactions.

         DIVIDENDS

        The Company has not paid any dividends on its common stock for the
        two most recent fiscal years and intends to retain its earnings
        for use in the development of its business.  Therefore, the
        Company does not expect to pay cash dividends at any time in the
        foreseeable future.  No contractual restrictions or limitations
        exist on the Company's present or future ability to pay dividends.

        Page 23

        CIRCUIT RESEARCH LABS, INC.

         
                       CORPORATE DIRECTORY
        
        OFFICERS AND DIRECTORS:

        Ronald R. Jones

        Chairman of the Board of Directors, President, Chief Executive
        Officer and
        Chief Operating Officer

        Gary D. Clarkson
        Secretary/Treasurer and Director

        Erle M. Constable
        Assistant Treasurer and Director

        Carl E. Matthusen
        Director
        General Manager KJZZ/Sun Sounds


        Gary M. Hamker
        Director

        Dennis L. Drew
        Vice President Operations and Assistant Secretary/Treasurer

                               CORPORATE INFORMATION
                              Corporate Headquarters:
                            Circuit Research Labs, Inc. 
                              2522 West Geneva Drive 
                               Tempe, Arizona  85282


        Transfer Agent and Registrar:          Independent Auditors:
            Harris Trust and Savings Bank        Deloitte & Touche LLP
            111 West Monroe Street               2901 North Central Avenue
            Chicago, Illinois 60603              Suite 1200        
                                                 Phoenix, Arizona 85012

        Financial Public Relations Counsel:    Corporate Counsel:
            The Equity Group Inc.                James S. Freedman, Esquire
            919 Third Avenue                     4455 East Camelback Rd., E160
            New York City, New York 10022        Phoenix, Arizona  85018


        Additional Information:

        A copy of Circuit Research Labs, Inc.'s current Form 10-KSB has
        been filed with the Securities and Exchange Commission and is available
        on request without charge by writing to the company's corporate
        headquarters and marked: Attention: Investor Relations.